What is TH.TO's Intrinsic value?

Theratechnologies Inc (TH.TO) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Theratechnologies Inc's estimated intrinsic value ranges from $2.44 to $3.51 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $3.51 -2.7%
Discounted Cash Flow (5Y) $2.44 -32.3%

Is Theratechnologies Inc (TH.TO) undervalued or overvalued?

With the current market price at $3.61, the stock appears to be moderately overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Theratechnologies Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.58 0.79
Cost of equity 6.1% 9.0%
Cost of debt 11.0% 11.7%
Tax rate 0.6% 1.3%
Debt/Equity ratio 0.38 0.38
After-tax WACC 7.4% 9.7%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $86 (FY11-2024) to $149 (FY11-2034)
  • Net profit margin expansion from -10% to -1%
  • Capital expenditures maintained at approximately 1% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $2 $126M 83.2%
10-Year Growth $3 $162M 69.6%
5-Year EBITDA $1 $81M 73.8%
10-Year EBITDA $1 $111M 55.5%

Key Financial Metrics

Metric Value
Market Capitalization $166M
Enterprise Value $230M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 10.00
Current Dividend Yield 0.00%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.38

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 55% $1.05
Discounted Cash Flow (5Y) 45% $0.61
Weighted Average 100% $3.03

Investment Conclusion

Based on our comprehensive valuation analysis, Theratechnologies Inc's weighted average intrinsic value is $3.03, which is approximately 16.2% below the current market price of $3.61.

Key investment considerations:

  • Strong projected earnings growth (-10% to -1% margin)
  • Consistent cash flow generation

Given these factors, we believe Theratechnologies Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.